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Cardtronics swings to Q4 net profit

11 February 2010  |  3327 views  |  0 Source: Cardtronics

Cardtronics (Nasdaq:CATM), the world's largest non-bank owner of ATMs, today announced its financial and operational results for the quarter and year ended December 31, 2009.

  • Key financial and operational statistics related to the quarter include:
  • Consolidated revenues of $124.8 million, up 6% from the fourth quarter of 2008
  • Revenue growth of approximately 8% for the Company's core business operations, which include the Company's domestic company-owned large-account ATM placement and branding business and the Company's international operations
  • Gross margins of 31%, up considerably from 24% in the fourth quarter of 2008
  • Adjusted EBITDA of $27.6 million, up more than 44% from $19.1 million in the fourth quarter of 2008
  • Adjusted Net Income per Share of $0.17, up from $0.02 in the fourth quarter of 2008
  • GAAP Net Income of $1.5 million compared to a $58.5 million GAAP Net Loss in the fourth quarter of 2008
  • Free Cash Flow of nearly $18.0 million, consisting of $27.0 million of cash provided by operating activities, less $9.0 million of capital expenditures, enabling the repayment of all amounts previously outstanding under the Company's revolving credit facility
  • Continued improvements in several key operating metrics when compared to the fourth quarter of 2008:
  • Total cash withdrawal transactions and cash withdrawal transactions per ATM per month increased by 8%
  • Total transactions per ATM per month increased by 10%
  • ATM operating gross profit per ATM per month increased by 43%

Please refer to the "Disclosure of Non-GAAP Financial Information" contained later in this release for definitions of Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow. For additional financial information, including reconciliations to comparable GAAP measures, please refer to the supplemental schedules of selected financial information at the end of this release.

"2009 was truly an outstanding year for Cardtronics," commented Fred Lummis, Cardtronics' Chhairman of the Board. "Over this past year, we took steps to strengthen and diversify the Company by leveraging past investments, controlling our costs and maintaining our high level of customer service. The results of these efforts were record revenues and cash flows, which allowed us to pay off our entire revolving loan balance in 2009 and reduce our ratio of debt to Adjusted EBITDA from 4.2x at the end of 2008 to 2.8x at the end of 2009. Additionally, we continued to see favorable transaction trends in all of our key markets, further validating the earnings generation capabilities of our existing network. With these positive factors and the recent hiring of Steve Rathgaber as our new Chief Executive Officer, Cardtronics is extremely well-positioned to not only continue these positive trends, but to also expand its services and offerings in ways that further leverage the Company's valuable network."

RECENT HIGHLIGHTS

  • The selection of Steven A. Rathgaber as the Company's new Chief Executive Officer and member of the Company's Board of Directors, effective February 1, 2010. Mr. Rathgaber, a seasoned payments industry executive, brings over 32 years of broad payment product and network experience to the Company.
  • The successful renewal of the Company's contract with CO-OP Financial Services, under which the Company's ATMs located in 7-Eleven stores will continue to be a part of the CO-OP network through July 2014. Each month, CO-OP members conduct more than 3.2 million surcharge-free transactions on Cardtronics ATMs in 7-Eleven stores.
  • The successful execution of two ATM managed services agreements with Carnival Cruise Lines and the American Airlines Center, under which Cardtronics will provide transaction processing and other related ATM management services to such customers.
  • The planned expansion of the Company's United Kingdom in-house armored car operation. As of December 31, 2009, this operation was servicing approximately 780 of the Company's ATMs through its London-based depot. The Company expects to open a second depot based in Manchester during the second quarter of 2010, which will allow the Company to service an additional 800 ATMs in the United Kingdom.
  • Continued strong liquidity and access to capital, with over $170 million in available borrowing capacity under the Company's revolving credit facility with leading financial institutions, after taking into consideration outstanding letters of credit

FOURTH QUARTER RESULTS

For the fourth quarter of 2009, revenues totaled $124.8 million, representing a 6% increase from the $118.2 million in revenues generated during the fourth quarter of 2008. This increase reflects 8% growth in the Company's core business operations, which include the Company's higher-margin domestic large-account ATM placement, branding and international businesses, offset somewhat by a decline in the Company's lower-margin merchant-owned account base and lower equipment sales, as merchants and financial institutions continued to spend less capital in the current economic environment. Although these declines negatively impacted the year-over-year revenue comparison, the gross profit impact of such declines was negligible as the Company's gross margins increased to 31% for the fourth quarter of 2009 compared to 24% for the same period in 2008. The significant increase in the Company's core revenues was driven by continued strong cash withdrawal transaction trends in all of the Company's operating segments, coupled with increased bank branding and surcharge-free network revenues in the United States. Furthermore, unlike the previous quarters during 2009, the impact of foreign currency exchange rate movements on the Company's comparative results for the fourth quarter of 2009 was negligible.

Adjusted EBITDA totaled $27.6 million for the fourth quarter of 2009, compared to $19.1 million for the fourth quarter of 2008, and Adjusted Net Income totaled $6.8 million ($0.17 per diluted share), compared to Adjusted Net Income of $0.7 million ($0.02 per diluted share) for the fourth quarter of 2008. These increases were primarily attributable to significantly higher gross margins in 2009 when compared to 2008, driven by the increase in revenues, as noted above, the continued shifting of revenues from lower-margin surcharge revenues to higher-margin interchange and surcharge-free network and bank branding revenues, and the Company's ability to leverage its fixed cost infrastructure to generate strong margins from those higher revenues. In particular, the Company experienced noticeable declines in its maintenance and armored car expenses during the most recent quarter, despite the significant increase in revenues discussed above. Additionally, the Company's vault cash rental costs were significantly lower in 2009 when compared to 2008 due to lower overall market interest rates. Specific costs excluded from Adjusted EBITDA and Adjusted Net Income are detailed in a reconciliation included at the end of this press release.

GAAP Net Income for the quarter totaled $1.5 million, compared to a $58.5 million GAAP Net Loss during the same quarter in 2008. The 2008 net loss figure includes a non-cash charge totaling $50 million related to the impairment of the Company's goodwill associated with its United Kingdom operation as of December 31, 2008.

FULL-YEAR RESULTS

Revenues totaled $493.4 million for the year ended December 31, 2009, which is comparable to the $493.0 million in revenues recorded during the year ended December 31, 2008. However, on a constant currency basis, which is defined in the "Disclosure of Non-GAAP Financial Information" below, year-over-year revenues increased by 4%. Although total revenues remained fairly constant between the two years, approximately $18.1 million in revenues shifted from surcharge revenue and equipment sales in 2008, to interchange and surcharge-free network and bank branding revenues in 2009. This shift was primarily due to the mix shift from the Company's merchant-owned account base to its core business operations, as noted above for the Company's quarterly results.

Adjusted EBITDA totaled $110.4 million for the year ended December 31, 2009, representing a 35% increase over the $81.9 million in Adjusted EBITDA for the same period in 2008. Adjusted Net Income totaled $26.5 million ($0.67 per diluted share) for 2009, which was significantly higher than the $7.6 million ($0.19 per diluted share) generated during 2008. Increases in both Adjusted EBITDA and Adjusted Net Income were primarily due to the same factors noted above for the Company's quarterly results.

The Company recorded GAAP Net Income for the year ended December 31, 2009 of $5.3 million, compared to a GAAP Net Loss of $71.4 million during 2008. As previously mentioned, the 2008 net loss figure includes a $50 million goodwill impairment charge related to the Company's United Kingdom segment. Excluding this goodwill impairment charge, the Company's year-over-year improvement was primarily attributable to the factors identified above in the discussion of Adjusted EBITDA and Adjusted Net Income.

GUIDANCE

Below is the Company's financial guidance for the fiscal year ending December 31, 2010:

  • Revenues of $520 million to $530 million;
  • Overall gross margins of approximately 30% to 30.5%;
  • Adjusted EBITDA of $118 million to $123 million;
  • Depreciation and accretion expense of $40 million to $41 million;
  • Cash interest expense of $29 million to $30 million;
  • Adjusted Net Income of $0.75 to $0.85 per diluted share, based on approximately 41.5 million diluted shares outstanding; and
  • Capital expenditures of approximately $45 million, net of noncontrolling interests.

The above guidance excludes the impact of certain one-time items as well as $6 million to $6.5 million of anticipated stock-based compensation expense and approximately $14 million to $15 million of intangible asset amortization expense. Additionally, the above guidance is based on estimated average foreign currency exchange rates of $1.60 U.S. to 1.00 pound U.K. and $13.50 Mexican pesos to $1.00 U.S.

LIQUIDITY

The Company continues to maintain a very strong liquidity position. The Company's $175.0 million revolving credit facility does not expire until May 2012 and is led by a syndicate of leading banks. As of December 31, 2009, the Company had no amounts outstanding under the facility and $4.7 million in letters of credit posted under the facility, leaving $170.3 million in available, committed funding. The Company is currently in compliance with the covenants contained within this facility and would continue to be in compliance even in the event of substantially higher borrowings or substantially lower Adjusted EBITDA amounts. The Company's remaining indebtedness includes $0.2 million of capital leases in the United States, $9.8 million of equipment loans in Mexico, and $297.2 million in senior subordinated notes, net of discounts. The fixed rate senior subordinated notes require no amortization prior to their August 2013 maturity date and contain no maintenance covenants and only limited incurrence covenants under which the Company has considerable flexibility.

The continued generation of pre-tax operating profits could subject the Company to increased federal, state and local income tax cash obligations in many of its jurisdictions. However, the Company currently has in excess of $38 million of domestic federal net operating loss carryforwards that can be utilized to help offset such future cash tax obligations, subject to certain restrictions and limitations.

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